Forward the Original Title‘一览借贷协议 Morpho：凭何融资逾 8000 万美元？’

On August 1st, the lending protocol Morpho Labs announced that it had secured $50 million in funding, led by Ribbit Capital, with participation from top-tier venture capital firms such as a16z crypto. Notably, this marks a16z’s second investment in Morpho.

But what is Morpho, and what unique strengths does it have that enabled it to attract such significant investment?

What is Morpho?

Morpho made its debut two years ago, initially focusing on its core product, the Morpho Optimizer. The Optimizer functioned as an enhancement layer on top of Aave and Compound, using a peer-to-peer matching algorithm to boost lending rates for users.

Since then, Morpho has grown into a standalone financial infrastructure. Its lending layer, Morpho Blue, now operates independently of the Morpho Optimizer, enabling the creation of efficient lending markets in a permissionless manner.

Notably, Morpho Blue also allows for the development of additional modular layers on top of it. These layers offer users a range of risk profiles and specialized lending services, all while being supported by the foundational Morpho Blue layer.

As for the project’s background, Morpho Labs was co-founded by four individuals: Merlin Egalite, Paul Frambot (CEO), Mathis Gontier Delaunay (Head of Protocol), and Julien Thomas. According to Forbes, Morpho Labs’ CEO, Paul Frambot, secured seed funding during his final year as an engineering student. Merlin Egalite previously worked as a smart contract white-hat at the blockchain dispute resolution platform Kleros and as a software engineer at Commons Stack.

In mid-2022, Morpho raised $18 million in a funding round led by a16z and Variant, with participation from Nascent, Semantic Ventures, Cherry Ventures, Mechanism Capital, Spark Capital, Standard Crypto, Coinbase Ventures, and 80 other institutions and individual investors.

Earlier this month, Morpho Labs completed a $50 million funding round led by Ribbit Capital, with participation from a16z crypto, Coinbase Ventures, Variant, Pantera, Brevan Howard, BlockTower, Kraken Ventures, Hack VC, IOSG, Rockaway, L1D, Semantic, Mirana, Cherry, Fenbushi, LeadBlock Bitpanda Ventures, Robot Ventures, and over 40 other companies.

How does Morpho work?

The Morpho Blue platform is highly flexible, allowing for the creation of independent markets without the need for permission. To deploy an independent lending market, you simply specify a collateral asset, a loan asset, a liquidation loan-to-value ratio (LLTV), an interest rate model (IRM), and an oracle. Once these parameters are set, they cannot be changed.

This flexibility allows project teams to effectively tailor incentive strategies to specific use cases. The Universal Reward Distributor (URD) mechanism plays a key role here, accommodating both external project incentives and MORPHO token rewards, thereby simplifying the complex DeFi reward distribution process.

For price information, Morpho Blue leverages external oracles and is compatible with various services like Chainlink, Redstone, and Uniswap.

Liquidation on Morpho Blue is straightforward. If a user’s loan-to-value ratio (LTV) in a specific market exceeds that market’s liquidation loan-to-value ratio (LLTV), the account is at risk of liquidation. Anyone can initiate the liquidation by repaying the account’s debt in exchange for an equivalent amount of the market’s collateral assets and an incentive.

Morpho Blue also handles bad debt differently from traditional lending protocols. If, after liquidation, an account still has outstanding debt without sufficient collateral, the loss is shared among all lenders based on a predetermined ratio. While the design, where LPs bear the risk of bad debt, has raised concerns within the community, Morpho CEO Paul Frambot reassures that this won’t lead to Morpho’s bankruptcy; even if bad debts occur, they will only impact specific independent markets.

It is worth noting that Morpho Blue is different from protocols such as Aave or Compound that use aToken or cToken in asset representation. Instead, it uses a smart contract-level mapping mechanism to track user positions. Under this mechanism, users’ assets are managed in the form of “shares,” thus achieving high-precision tracking of asset allocation within the Morpho Blue protocol. This not only ensures the accurate calculation of asset and liability values, but also enables a more accurate display of supply and loan balances, while effectively preventing potential manipulation of share prices.

In order to improve lending efficiency and simplify user experience, Morpho Blue only focuses on lending business, while MetaMorpho, built on top of it, enables permissionless market creation and permissionless risk management.

MetaMorpho is a lending treasury protocol built on the Morpho Blue protocol, corresponding to the Earn section in Morpho. As shown in the figure below, DAOs, protocols, individuals, hedge funds, etc. can create vaults in MetaMorpho without permission. Each vault contains a loan asset, and exposures can be customized to allocate deposits within it to one or more Morpho Blue markets.

In this process, the treasury earns income by providing financial services to the borrower, and the borrower needs to deposit collateral to access the liquidity of the underlying assets and pay corresponding interest to the treasury.

The income structure of the MetaMorpho vault includes native annualized yield (APY), rewarded annualized rate (APR), and MORPHO token rewards.

What Makes Morpho Stand out?

The most notable feature of Morpho Blue is its permissionless design. This allows users to create isolated lending markets autonomously by setting a variety of parameters, without needing external governance to add assets or manage settings. This gives market creators significant control, enabling them to independently manage the risk and returns of their lending pools according to their own assessments, thereby catering to the diverse risk preferences and needs of the market.

The MetaMorpho Vault is designed to streamline the lending process, improve user experience, and consolidate market liquidity. It offers users not only the chance to access independent markets and participate in lending pools but also the ability to provide liquidity easily, earning passive interest in the process.

Another significant advantage of the MetaMorpho Vault is its customizable risk strategies and performance fee settings. Each vault can be tailored with different risk exposures and performance fee structures to meet specific needs. For instance, a vault focused on LST (Liquid Staking Token) assets will only have exposure to LST-related risks, while another vault centered on RWA (Real-World Assets) may target RWA assets. This flexibility allows users to select and invest in vaults that best match their risk tolerance and investment objectives.

Morpho Blue includes a fee switch mechanism within the protocol, providing the flexibility to adjust the fee structure dynamically through future community governance decisions. This mechanism allows for charging borrowers in specific markets a fee ranging from 0% to 25% of the total interest, with all fees collected going directly to the Morpho DAO. It’s important to note that the Morpho DAO cannot charge fees on MetaMorpho; the MetaMorpho Vaults generate revenue solely from user performance management fees. This design ensures a fair balance of interests between the vaults and the users.

How is the MORPHO Token Allocated?

MORPHO, the governance token at the heart of the Morpho protocol, has been officially issued but is not yet in circulation. Its main value lies in giving holders the power to participate in key decisions regarding the protocol. Whether it’s deciding on the deployment strategy for Morpho’s smart contracts, determining ownership, enabling and adjusting the fee switch, or managing the governance DAO’s finances, MORPHO holders can vote and influence the protocol’s future direction.

MORPHO has a maximum total supply of 1 billion tokens. Of these, 27.6% is allocated to investors, 15.2% to the founding team, 4.8% to early contributors, independent researchers, and advisors, 6% to the Morpho Labs reserve, 6.6% to the Morpho Association reserve, 35.7% to Morpho DAO, and 4.2% to users (with the possibility of this amount increasing).

How is Morpho Blue Performing?

Since its launch on the Ethereum mainnet earlier this year, Morpho Blue has attracted a total of $1.35 billion in deposits and $510 million in loans as of the time of writing. Particularly noteworthy is its rapid rise on the Base chain, where, since its mid-June launch, Morpho Blue has amassed $110 million in deposits and $36.84 million in loans. Morpho Optimizer has also seen strong performance, with total deposits reaching $910 million.

Morpho Blue is currently deployed on both the Ethereum mainnet and the Base chain, with 43 and 32 MetaMorpho Vaults, respectively, offering a wide range of lending and asset management options tailored to different risk preferences and investment needs.

According to the latest data from DefiLlama, Morpho ranks fifth in Total Value Locked (TVL) among DeFi lending protocols, following Aave, JustLend, Spark, and Morpho.

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